Confederation of British Industry predictions for 2011.

A report out by the Confederation of British Industry (CBI) says the UK economy will escape a “double dip” next year, but households face a tight squeeze on living standards.

With a hike in VAT to 20% coming on 4 January and consumer confidence hitting record lows, ministers will be concerned the UK’s fragile recovery could be derailed by renewed crises in the eurozone, writes the Independent.

The CBI said that the Bank of England will need to raise interest rates further and faster than previously thought, because of the impact of rising world commodity prices on inflation.

The bank rate, which currently stands at 0.5%, will be 0.75% by the spring of next year the CBI said, rising steadily to 1.25% this time next year and to 2.75% by the end of 2012.

Even at such levels, however, rates would be low by historical standards. The upward trend in rates will put additional pressure on the seven million mortgagors on variable rate deals linked to the Bank rate, adding hundreds of pounds a month to mortgage repayments.

Despite many risks to the outlook, and a forecast of particularly fragile growth at the beginning of 2011, the UK recovery is expected to be maintained”, according to the CBI, which “still considers the risk of a double dip back into recession to be low”.

What do we think?

For 2010 we have not been recommending short term Fixed rates although some clients have been requesting them. Lifetime trackers still offer good value as even at 5% by the end of 2012 they are still lower than rates we have seen in the past buy a long way, however the 3.75% and 3.99% 5 year deals we have on offer look very good now and is by far the most sold product we have currently.

Our rates guide and calculators can be found here, http://www.mortgage-finder.org/index.php/2010/11/24/calculate-your-mortgage/

Our offices are open over Christmas 9.00 till 17.00 so feel free to call for a chat. Rob